| Schedule of Impact to Reported Results of the Adoption of ASC 606 |
The impact on the Company’s 2017 and 2016 Consolidated Statement of Operations as a result of the adoption of the new standard is as follows:
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Year Ended |
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December 30,
2017 |
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December 31,
2016 |
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As reported |
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Adjustment |
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As adjusted |
|
As reported |
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Adjustment |
|
As adjusted |
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(In millions, except per share amounts) |
Net revenue (1)
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$ |
5,329 |
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|
$ |
(76 |
) |
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$ |
5,253 |
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$ |
4,272 |
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$ |
47 |
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$ |
4,319 |
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Cost of sales (1)
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3,506 |
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(40 |
) |
|
3,466 |
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|
3,274 |
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|
42 |
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3,316 |
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Gross margin |
1,823 |
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(36 |
) |
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1,787 |
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|
998 |
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5 |
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|
1,003 |
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Research and development (2)
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1,160 |
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36 |
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1,196 |
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|
1,008 |
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— |
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|
1,008 |
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Marketing, general and administrative |
511 |
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5 |
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516 |
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|
460 |
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6 |
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|
466 |
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Restructuring and other special charges, net |
— |
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— |
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— |
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(10 |
) |
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— |
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(10 |
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Licensing gain |
(52 |
) |
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— |
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(52 |
) |
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(88 |
) |
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— |
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(88 |
) |
Operating income (loss) |
204 |
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|
(77 |
) |
|
127 |
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(372 |
) |
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(1 |
) |
|
(373 |
) |
Interest expense |
(126 |
) |
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— |
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(126 |
) |
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(156 |
) |
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— |
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(156 |
) |
Other income (expense), net |
(9 |
) |
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— |
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(9 |
) |
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80 |
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— |
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|
80 |
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Income (loss) before equity loss and income taxes |
69 |
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(77 |
) |
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(8 |
) |
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(448 |
) |
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(1 |
) |
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(449 |
) |
Provision for income taxes |
19 |
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(1 |
) |
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18 |
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|
39 |
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— |
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|
39 |
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Equity loss in investee |
(7 |
) |
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— |
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(7 |
) |
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(10 |
) |
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— |
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(10 |
) |
Net income (loss) |
$ |
43 |
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$ |
(76 |
) |
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$ |
(33 |
) |
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$ |
(497 |
) |
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$ |
(1 |
) |
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$ |
(498 |
) |
Earnings (loss) per share |
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Basic |
$ |
0.04 |
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$ |
(0.07 |
) |
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$ |
(0.03 |
) |
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$ |
(0.60 |
) |
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$ |
— |
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$ |
(0.60 |
) |
Diluted |
$ |
0.04 |
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$ |
(0.07 |
) |
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$ |
(0.03 |
) |
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$ |
(0.60 |
) |
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$ |
— |
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$ |
(0.60 |
) |
Shares used in per share calculation |
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Basic |
952 |
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|
952 |
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|
835 |
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|
835 |
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Diluted |
1,039 |
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|
952 |
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|
835 |
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|
835 |
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(1) |
2017 and 2016 revenue and cost of sales changes were due to a net drain (decrease in revenue) or net build (increase in revenue) in channel and semi-custom product inventories. |
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(2) |
2017 Research and development expenses increased due to the absence of credits to research and development expenses recognized for a development and intellectual property licensing agreement under the “As reported” standard, which will be recognized as revenue for the entire consideration upon transfer of control of the IP license to the customer under the new standard. |
The impact on the Company’s affected 2017 and 2016 Consolidated Balance Sheets line items, as a result of the adoption of the new standard is as follows:
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Year Ended |
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December 30,
2017 |
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December 31,
2016 |
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As reported |
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Adjustment |
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As adjusted |
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As reported |
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Adjustment |
|
As adjusted |
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(In millions) |
Accounts receivable, net (1)
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$ |
400 |
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$ |
54 |
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$ |
454 |
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$ |
311 |
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$ |
61 |
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$ |
372 |
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Inventories, net (2)
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739 |
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(45 |
) |
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694 |
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751 |
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(60 |
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691 |
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Other current assets |
188 |
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3 |
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|
191 |
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|
109 |
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6 |
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|
115 |
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Accrued liabilities |
541 |
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|
14 |
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|
555 |
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|
391 |
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9 |
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|
400 |
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Other current liabilities (3)
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57 |
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35 |
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|
92 |
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|
69 |
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— |
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|
69 |
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Deferred income on shipments to distributors (4)
|
22 |
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(22 |
) |
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— |
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|
63 |
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(63 |
) |
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— |
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Accumulated deficit |
(7,760 |
) |
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(15 |
) |
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(7,775 |
) |
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(7,803 |
) |
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61 |
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(7,742 |
) |
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(1) |
2017 and 2016 Accounts receivable, net increased primarily due to the acceleration in timing of semi-custom product revenue. |
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(2) |
2017 and 2016 Inventories, net decreased primarily due to the acceleration in timing of semi-custom product revenue. |
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(3) |
2017 Other current liabilities adjusted primarily due to the absence of credits to research and development expenses recognized for a development and intellectual property licensing agreement under the “As reported” standard, which will be recognized as revenue for the entire consideration upon transfer of control of the IP license to the customer under the new standard. The credits are recorded as deferred revenue under the new standard. |
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(4) |
2017 and 2016 deferred income on shipments to distributors is eliminated due to the change in the revenue recognition model for sales to distributors, whereby revenue is recognized upon the shipment of the product to the distributors (sell-in), instead of upon reported resale of the product by the distributors to their customers (sell-through). |
The impact on the Company’s 2017 and 2016 net revenue and operating income (loss) by segments as a result of the adoption of the new standard is as follows:
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Year Ended |
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December 30,
2017 |
|
December 31,
2016 |
|
As reported |
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Adjustment |
|
As adjusted |
|
As reported |
|
Adjustment |
|
As adjusted |
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(In millions) |
Net revenue: |
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Computing and Graphics (1)
|
$ |
3,029 |
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$ |
(52 |
) |
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$ |
2,977 |
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$ |
1,967 |
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$ |
21 |
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$ |
1,988 |
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Enterprise, Embedded and Semi-Custom (2)
|
2,300 |
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(24 |
) |
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2,276 |
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|
2,305 |
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26 |
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|
2,331 |
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Total net revenue |
$ |
5,329 |
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|
$ |
(76 |
) |
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$ |
5,253 |
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$ |
4,272 |
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$ |
47 |
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$ |
4,319 |
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Operating income (loss): |
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Computing and Graphics (3)
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$ |
147 |
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$ |
(55 |
) |
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$ |
92 |
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$ |
(238 |
) |
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$ |
(5 |
) |
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$ |
(243 |
) |
Enterprise, Embedded and Semi-Custom (4)
|
154 |
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(22 |
) |
|
132 |
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|
283 |
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4 |
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|
287 |
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All Other |
(97 |
) |
|
— |
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(97 |
) |
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(417 |
) |
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— |
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(417 |
) |
Total operating income (loss) |
$ |
204 |
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$ |
(77 |
) |
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$ |
127 |
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$ |
(372 |
) |
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$ |
(1 |
) |
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$ |
(373 |
) |
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(1) |
2017 and 2016 Computing and Graphics revenue changes were due to a net drain (decrease in revenue) or net build (increase in revenue) in channel inventory. |
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(2) |
2017 and 2016 Enterprise, Embedded and Semi-Custom revenue changes were due to a net drain (decrease in revenue) or net build (increase in revenue) in semi-custom product inventory. |
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(3) |
2017 Computing and Graphics operating income decreased primarily due to the lower revenue from sales to distributors. In addition, 2017 is lower due to the absence of credits to research and development expenses recognized for a development and intellectual property licensing agreement under the “As Reported” standard, which will be recognized as revenue for the entire consideration upon transfer of control of the IP license to the customer under the new standard. 2016 Computing and Graphics operating loss increased due to slightly higher operating expenses. |
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(4) |
2017 Enterprise, Embedded and Semi-Custom operating income decreased primarily due to lower revenue from sales of semi-custom products. In addition, 2017 is lower due to the absence of credits to research and development expenses recognized for a certain development and intellectual property licensing agreement under the “As reported” standard, which will be recognized as revenue for the entire consideration upon transfer of control of the IP license to the customer under the new standard. 2016 Enterprise, Embedded and Semi-Custom operating income increased due to higher revenue from sales of semi-custom products. |
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